“Telling the truth is only possible by accident through a special sort of boastfulness…”

– Fyodor Dostoevsky, “The Idiot”

Regular readers of Deep Capture are aware that we have sought to expose certain journalists who seem to serve the interests of a network of market miscreants, many of whom are tied to the famous criminal Michael Milken or his close associates.

One of these journalists is Roddy Boyd, who worked at the New York Post before moving to Fortune magazine. It has come to our attention that Roddy has left Fortune. The magazine did not return a phone call seeking comments on the circumstances behind his departure, but whatever those circumstances might be, it seems fit to honor his departure by publishing an excerpt from a book called “House of Cards.”

In this book, which is written by a Wall Street insider named William Cohan, Roddy is quoted at length, and one particular passage stands out for being quintessentially Roddy. While you are reading the passage, keep in mind that I spent a number of hours talking to Roddy some years ago, and can report that he has a manner of speaking that is similar to what Dostoevsky called “a special sort of boastfulness” –which is to say that Roddy likes to stroke his own back, and in so doing, he often rambles in such a way as to unintentionally admit to his own buffoonery, or to some form of miscreancy on the part of his favorite Wall Street sources.

In this passage, Roddy tells the story of certain communications he had with Tom Marano, Bear Stearns’s (NYSE:BSC) top mortgage trader, on March 6, 2008 – a few days before false rumors began swirling about Bear Stearns’s access to credit. The following week, the false rumors were rampant, and those rumors, along with naked short selling, quickly brought Bear to its knees.

A couple of weeks after the collapse of Bear Stearns, Marano found a new job – with Cerberus Capital Management. As I have detailed elsewhere, Cerberus is run by Steve Feinberg, who was once one of Michael Milken’s top traders at Drexel Burnham. After working for Milken, Feinberg moved to Gruntal & Co., a criminal-infested brokerage, where he worked closely with Steve Cohen, who was once investigated by the SEC for trading on inside information fed to him by Michael Milken’s staff at Drexel. Cohen now runs SAC Capital, believed to be one of the biggest short sellers of Bear Stearns’s stock.

I am not yet going to state what I think is important about the passage quoted below. But I have other reasons to believe that the facts that Roddy drops in the course of his braggadocio are key to understanding what happened to Bear Stearns. Read the passage yourself, focusing on the facts, not on Roddy’s version of the facts. Consider that Roddy’s conversation with Marano took place on March 6, when there were not yet any rumors in the market, and Bear’s stock was trading above $60. Then, let me know if you spot what’s important.

Here’s the passage:

“…at eleven in the morning on March 6 Marano placed a phone call to Roddy Boyd, then a writer at Fortune. Marano had been a source of Boyd’s for years, when the journalist was covering Wall Street at the New York Post, and had freely offered commentary about his competitors and the markets generally. Boyd had been a trader for eight years before switching careers to journalism, and the two men spoke the same language. ‘I know the mortgage product dead cold,’ Boyd said. Their relationship was a well-defined pas de deux. ‘It was unusually well defined,’ [Boyd] explained. ‘We knew exactly what we were saying. I could have a very long conversation in two minutes. I protected him always. I never BS’d with him. I never got him in hot water. The corollary was he never BS’d with me, and he would give me good stuff.’

“This time, Marano called Boyd to talk about Bear Stearns, and specifically about his concern that the firms he had traded with for years were suddenly asking him whether Bear had enough cash on hand to execute his trades. ‘He called me at 11:00 A.M. that day and we talked about one or two things,’ Boyd continued. ‘It was weird. He knew it was weird. We did small talk in under ten seconds. I said to him, ‘What’s up?’ He said, ‘What are you hearing about Bear?’ I said, ‘You know what I’m hearing and you know what I’m seeing. He said, ‘I know what you’re hearing and you’re seeing. It’s just baffling.’ Now here I’m playing him a little because I’m hearing things and I’m seeing some things, but he’s not saying much more than I am, so I let him walk and talk. He said to me, ‘Roddy, our guys, our senior guys here, are hearing a really strange thing from custies.’ That’s customers. He said, ‘We were not prepared to hear stuff like this. This is baffling. People are quite literally questioning our solvency, questioning our ability to go on. The shorts are having a lot of fun with us today.’…

“‘He’s thinking two things,’ Boyd continued. ‘One, he’s got to stop this whole line of inquiry right here, right now, because if you have to ask the question, oh my God. Second, he’s thinking about the trajectory of rumor and supposition, and that thesis of smoke versus fire….With a question of their ability to act as a counterparty on the table, that’s unimaginable. I mean, this is Bear Stearns….Now they’re being questioned from the standpoint of fundamental liquidity. He [Marano] said that he believed that these short sellers had been speculating in the credit default swap market and telling counterparties at other firms that they had concerns about Bear Stearns’s liquidity and solvency, and that was driving the cost of spreads wider. What that was doing was making their overnight funding more expensive. That was cutting into their profit margin, and in turn was also starting a sort of cottage industry of rumors about Bear Stearns.’

Roddy continued: “‘There’s no need to explain anything between us,’ he [Marano] said. I said, ‘Are you sure you’re seeing this?’ He said, ‘Look at [the credit default] swaps.’ So I looked them up and then I see the hockey sticks’ — a sharp spike up in their cost… ‘He said, ‘It’s unbelievable. It all bullshit.’ At that point—he’s very much a corporate guy—but he had left me [with a clear message]. I’m not stupid. Hedge funds and prime brokerage accounts are unusually skittish about questions of financial health, financial solvency, and he said, ‘I’m hearing there’s questions about our financial health.’ At that point, Marano is telling me he knew he was done, because once that question of credibility goes out there, and serious people say it to you enough, you’re done. It’s all that there is to it. It’s all that there is to it. Where do you go to get your reputation back.’ …

“Boyd worked hard [the following night] and over the weekend trying to figure out which bank—said to be European—had decided it would no longer be a counterparty to Bear Stearns in the overnight financing markets. Obviously, this would be a huge negative development for the firm…‘At that point, I’m pulling my fucking hair out—pardon my language—calling everybody,’ [Boyd] said. ‘I’m calling Deutsche Bank, I’m calling UBS, and I’m very aggressive. Get your senior guys on the phone. Get your financing desk on the phone. I don’t want to talk to some stupid flack. I spent eight years on a desk. I’m smarter than all those flacks. They’re all Kool-Aid drinkers. They don’t honestly know a derivative from a bond from a stock. None of them are going to be able to ask their financing desk. They don’t even know enough to call the repo guys on the financing desk. I told them, Get your financing guys or get your credit guys on the phone with me, or you’re going in Fortune. Here’s the New York Post coming out of me. I said, There’s two ways this is going to work: bad or good. This hand is good; this hand is bad. I shake your hand or I punch you. Let me know…I’m talking to the guys in New York, and they’re saying, We swear to Christ we are not the ones to have done that [cut financing]. If Deutsche Bank had done it, I’m thinking, ‘Okay, that’s the story right there.’ The minute a repo line gets pulled, you die, okay? They die a terrible death.’…

Roddy continued that, after the March 6 call with Marano, ‘“I was thinking, I’m going to poke around in this more…but then I was thinking, This is strange. This is like a situation where you can abuse your position as a reporter. When you’re at Fortune, you have to do stuff right. When you’re at the New York Post, you have to be there first and fastest. At Fortune, you write the first draft of history, and you have to get it right and you have to be consistently right. I’m thinking, I don’t really want to screw with this company – I don’t want to spread rumors. I don’t want to become part of the story. I don’t want to hurt people unnecessarily. I’m an aggressive guy and I’ll pick fights with anyone or anything, but there’s a right way of doing my job and there’s a wrong way. I weighed my duty as an employee here versus the right thing to do.”

Do you see what happened here? Feel free to post your opinion in the comments section. Or contact me privately by email at mitch0033@gmail.com.

82 Responses to “Roddy Boyd and the Bear Stearns Insider”

Let’s see. Marano, throws his own firm under the bus, gets shill Roddy, a known short – shill, on the case, and lands with a firm who was short Bear. Is that it? Of course, this is my “The Butler in the Dining Room with the Butterknife Moment”, and I’m just an amateur conspiracy nut. So, this is just my imagination running wild.

Like last nite….. I had this dream that Wall St. blew up, all the financial institutions blew up, the citizenry lost all their retirement savings, and American lost 550,000 jobs a week for months upon months.

Just my imagination. Just my crazy imagination.

Hear they stopped serving hot breakfast at Harvard? Or did I dream that too?

>>>This is like a situation where you can abuse your position as a reporter. When you’re at Fortune, you have to do stuff right. When you’re at the New York Post, you have to be there first and fastest. At Fortune, you write the first draft of history, and you have to get it right and you have to be consistently right. <<<

So, is he saying the NYP doesn't care about accuracy as much as being first with a story, facts be damned?
Interesting approach for a Tabloid Reported, but not for a real Journalist.

Bankers’ pay and bonuses is set to spark more anger this week after it was revealed that U.S. investment bank Goldman Sachs is set to pay out a record $23 billion to its employees.

Bumper third-quarter profits from the Wall Street giant last week should confirm that the average Goldman employee – including the 5,500 that work at its plush European HQ in Fleet Street – is on course to pocket around £500,000 for this year.

And as other U.S. banks prepare to release results this week, thousands more City bankers are hoping for confirmation that 2009 will be a fine year for bonuses.

Knaverupe, I think you have hit the nail on the head. If there were only a way to see who shorted the heck out of Bear (Put of 1.7 million for a profit of 270mill maybe) only the SEcand DTCC knows and they won’t tell right? Could Cerbus(sp) be the buyer of those infamous puts? That is the question and Roddy is guilty of spreading the rumors that started the end of Bear with the assistance of this Marano character!!!

First of all: I know that some hedge funds on the ‘short side’ are familiar with sleazy tricks like spreading false rumors.

However…, having read the story above, plus what I heard from Dutch investment guru Mr. Kamer about the collapse of Bear Stearns, mixing it with my personal experiences of over 25 years active in the WW Financial Markets, I don’t think there was any such thing as spreading a false rumor about Bear Stearns being close to being insolvent / unable to back ‘their trades’ a.o.

My common and marketssense tells me: it just doesn’t make any sense to spread false rumors about a solvent company, as a solvent company is solvent. My personal experiences – and I had quite some of them – with malicious short selling hedge funds tell me: they are mostly well informed and pay extremely well to credible information.

Accordingly and this is my opinion: any such thing as a assertion that malign hedge funds sunk Bear Stearns are IMHO unlikely.

What seems more likely to me, is the story revealed by Dutch investment guru Mr. Rienk Kamer. [The man factually started his career as a financial journalist.]
He told on Dutch TV that Bear Stearns had plans to sell-off its entire CDS portfolio…@market. This [huge] transaction would have caused a serious dip in the overall market for CDS’…and would have forced other U.S. Banks to write-off substantial values…IF Bear Stearns transaction had caused a major dip in the prices of CDS’.

Mr. Kamer claimed that — and this pleads for Tom Morano’s vision — Bear Stearns was actually in good health, but decided to offload its risky CDS portfolio. Specifically, as Mr. Kamer told, Bear Stearns was not that much invested in CDS’…and thus [as I claim] would not face that much risk compared to its assets/liabilities ration. Bear Stearns…had apparently ‘just’ decided to get rid of its CDS portfolio and was even prepared to take a loss on it. In other words: the company thus seemed to have the assets/solvency to write-off the loss and to move forward.

Than…and this is factually what Mr. Kamer declared, caused the myserious collapse — in just a matter of days as we know — of Bear Stearns: J.P. Morgan Chase became aware of the rumor that Bear Stearns was due to offload its entire position of CDS’. This seems to have caused some sort of panic @J.P. Morgan Chase and forced them to act rapidly. So J.P. Morgan had to sink Bear Stearns before they – Bear Stearns – had the ability to offload its CDS portfolio at any given price. Mr. Kamer explicitly told: it was NOT Bear Stearns that had to be rescued, but it was in fact J.P. Morgan Chase that had to be rescued from disaster, as J.P. Morgan faced a dramatic write-off regarding its CDS portfolio, if Bear Stearns managed to offload its CDS portfolio at ‘firesale’ prices.

Conclusion:
1. I am aware of Mr. Kamer’s status as a reliable source.
I know that J.P. Morgan effectively can be involved in massive sleazy games, as it is a untouchable.

2. Due to the massive amount of shortselling Bear Stearns shares, its seems unlikely to me that – even though they are BIG guys – the usual suspect hedge funds were involved in the killing of Bear Stearns.

3. Bear Stearns may have been close to insolvency, so those short sellers made a correct bet. We’ve witnessed the Barings Bank disaster…so as I don’t know which positions Bear Stearns had in the derivates markets, I guess we’re all speculating about Bear Stearns exposure to – if any – risky positions.

Ultimately: if I have to bet money, I would place my bet on Mr. Kamer’s version of events; i.e. J.P. Morgan Chase killed Bear Stearns, as J.P. Morgan Chase itself faced a collapse due to forced write-offs on its huge CDS portfolio.

Nobody had questioned their liquidity and backed out, but by calling everyone and asking who had, the party in question would have given everyone the impression that someone had. Consequently, due to the fact that everyone thought that someone did, everyone did. Allegedly and hypothetically, of course.

If the facts Michael states are true, as to the dates the rumors were or were not circulated, then the one things becomes clear:

The Bear Stearns downfall was an insider job with Marano involved. It’s incredible that 2 weeks later he gets a job with a hedge fund that was critical of Bear Stearns and profited from their downfall – and from a division within Bear that was ground zero for it’s demise, namely the Mortgage Securities Division.

Roddy implicated Marano in helping start the rumors to begin with. I can envision something like:

“Hell, as nobody knows better than us, we’re in real trouble with the values of our mortgage backed securities plummeting as we’re loaded up with them to the gills, so at least let’s save our own skin and jump ship. We can profit by helping others profit from Bears’ misery. Cerberus has responded with an offerer that if we push Bear down the stairs by questioning Bear’s solvency from within we’d make out well later.”

……

“At that point, Marano is telling me he knew he was done, because once that question of credibility goes out there, and serious people say it to you enough, you’re done. It’s all that there is to it. It’s all that there is to it.”

According to Schechter: “We need investigations by insiders who know where the bodies are buried, and in many cases, not yet” interred. We need more State Attorneys like Eliot Spitzer and enough honest politicians to embrace them. We need proof of who’s on the take followed by “a jailout, not (another) bailout. We need to remember Balzac’s insight (that) ‘Behind every great fortune lies a great crime,’ ” in a culture where the only one is getting caught.”

As a form of economic terrorism, indeed so says Schechter and many others. Ellen Brown, author of Web of Debt, writes: Schechter “establishes the crime’s elements, identifies the players, and exposes the weapons that have turned free markets into vehicles for mass manipulation and control.”

More still, according to former high-level government and Wall Street insider Catherine Austin Fitts in describing a “financial coup d’etat” that includes inflating multiple market bubbles, pump and dump schemes, naked short selling, precious metals price suppression, and active market intervention by Washington and the Fed that lets powerful insiders game the system, commit massive fraud, and be able to transfer trillions of public wealth to themselves, then get open-ended bailouts when the inevitable crisis surfaces.

In his last book, Plunder, Schechter deconstructed one element of the economy’s financialization – the outlandish amounts subprime lending, instrumental in inflating the housing bubble and the economic crisis that followed.

The Crime of Our Time is his latest attempt to explain “the financial collapse as a crime story (and) the high status white-collar crooks” who wreak havoc on “the lives of hundreds of millions worldwide.” He quotes from author and labor activist Jonathan Tasini in his new book, The Audacity of Greed, saying:

“Over the past quarter century, we have lived through the greatest looting of wealth in human history.” While an elite few profited hugely, “the vast majority of citizens have lived through a period of falling wages, disappearing pensions, and dwindling bank accounts, all of which led to the personal debt crisis that lies at the root of the current financial meltdown.”

Word to all the greedy and corrupt bankers and wallstreet criminals, you’ll die just like everyone else and you can NOT take it with you….All the stress associated with your greed might land you a one way ticket much sooner than us mainstreet victims…

The enitire article is now available online here is an exerpt and below is the link. Fascinating is this paragraph..

Or what? That this was a brazen case of insider manipulation was so obvious that even Sen. Chris Dodd, chairman of the pillow-soft-touch Senate Banking Committee, couldn’t help but remark on it a few weeks later, when questioning Christopher Cox, the then-chief of the Securities and Exchange Commission. “I would hope that you’re looking at this,” Dodd said. “This kind of spike must have triggered some sort of bells and whistles at the SEC. This goes beyond rumors.”

Cox nodded sternly and promised, yes, he would look into it. What actually happened is another matter. Although the SEC issued more than 50 subpoenas to Wall Street firms, it has yet to identify the mysterious trader who somehow seemed to know in advance that one of the five largest investment banks in America was going to completely tank in a matter of days. “I’ve seen the SEC send agents overseas in a simple insider-trading case to investigate profits of maybe $2,000,” says Brent Baker, a former senior counsel for the commission. “But they did nothing to stop this.”

Shame on all of you for accusing the SEC of not being on the ball. They successfully closed this case didn’t they?

“The U.S. Securities and Exchange Commission has dropped its five-year-old broker bribery case against Iain Brown Sr., a former Toronto resident who lived in the Bahamas. The regulator filed a notice on Oct. 14, 2009, voluntarily dismissing the charges after discovering that Mr. Brown died in May, 2008”.

SEC defender,
What would you expect from a bunch of burn’t out public defenders who land jobs at the SEC waiting for their revolving door into the BLACK world of WallStreet? If you can’t determine if they are dead or alive you can’t protect the investing public period…

Adam Storch had worked since 2004 in a Goldman unit that reviewed contracts and
transactions for signs of fraud. His new job is to make the SEC’s enforcement
division more efficient.

Bloomberg News

October 16 2009

The Securities and Exchange Commission hired a 29-year-old former employee in
Goldman Sachs Group Inc.’s business intelligence unit as the first chief
operating officer in the agency’s enforcement division, according to people
familiar with the decision.

[8:27am ET] Goldman Sachs (GS) reported quarterly earnings yesterday. The information you received from mainstream media was from the GS Exhibit 99.1 news release. You ought to have read the 8-K SEC filing and ignored the media.

Did you know that “The information furnished pursuant to this Item 2.02 (Results of Operations and Financial Condition), including Exhibit 99.1 (Press Release), shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Group Inc. under the Securities Act of 1933 or the Exchange Act”.

Did you know that the GS net revenue from trading stocks, bonds, currencies and commodities was $7.836 billion in the 3Q2009. As total net revenue was $10.03 billion, this figure does not include income from investment banking, lending, commissions, principal investments, etc. The 3Q2009 had 64 trading days, so the net revenues from trading were $122.44 million per day. That revenue, however, was AFTER they paid their traders their base compensation and bonuses, which were much greater than the reported net revenue.

Although the equities market is not a zero sum game, most of the income GS made from trading was in fact from zero-sum contracts, which means, as there is one winner and one loser, the public and GS clients had the other side of the trade and were the losers.

Now, if GS reported gross revenues from trading, not net, and split out the trading from zero-sum contracts, I think the public would be absolutely shocked over the amount of wealth transferred from their accounts to GS and for the most part into the pockets of the GS traders. Even the shareholders are getting screwed.

Anybody who says the capital market is a level playing field has rocks for brains.

Something to think about when the CNBC and Bloomberg news desk anchors are telling you about the “blow-out” earnings of Goldman Sachs.

Billionaire Arrested in Trading Scheme
By LARRY NEUMEISTER, AP
posted: 45 MINUTES AGOPrintShareText SizeAAANEW YORK (Oct. 16) — One of the wealthiest men in America was among six financially influential people arrested by federal authorities Friday in a hedge fund insider trading case that prosecutors say reaped $20 million in illegal profits.
Raj Rajaratnam, a partner in Galleon Management and a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to cause trades based on insider information about several publicly traded companies, including Google Inc.
Rajaratnam, 51, was ranked No. 559 by Forbes magazine this year among the world’s wealthiest billionaires, with a $1.3 billion net worth.
Rajaratnam — born in Sri Lanka and a graduate of University of Pennsylvania’s Wharton School of Business — has been described as a savvy manager of billions of dollars in technology and health-care hedge funds at Galleon, which he started in 1996. The firm is based in New York City with offices in California, China, Taiwan and India.
According to a criminal complaint filed in U.S. District Court in Manhattan, Rajaratnam obtained insider information and then caused the Galleon Technology Funds to execute trades that earned a profit of more than $12.7 million between January 2006 and July 2007. Other schemes garnered millions more, authorities said.
A spokesman for Rajaratnam did not immediately return a phone call for comment Friday.
The timing of the arrests might be explained by a footnote in the complaint against Rajaratnam. In it, an FBI agent said he had learned that Rajaratnam had been warned to be careful and that Rajaratnam, in response, had said that a former employee of the Galleon Group was likely be wearing a “wire.”
The agent said he learned from federal authorities that Rajaratnam had obtained a plane ticket to fly from Kennedy International Airport to London on Friday and to return to New York from Geneva, Switzerland next Thursday.
Five others charged in the scheme included Rajiv Goel, a director of strategic investments at Intel Capital, the investment arm of Intel Corp., Anil Kumar, a director at McKinsey & Co. Inc., a global management consulting firm, and Robert Moffat, senior vice president and group executive at International Business Machines Corp.’s Systems and Technology Group.
The other two people charged in the case were identified as Danielle Chiesi and Mark Kurland. According to court papers, Chiesi worked for New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc. that had assets worth about $1 billion under management. Kurland is a top executive at New Castle.
A criminal complaint filed in the case shows that an unidentified person involved in the insider trading scheme began cooperating and authorities obtained wiretaps of conversations between the defendants.
In one conversation about a pending deal that was described in a criminal complaint, Chiesi is quoted as saying: “I’m dead if this leaks. I really am. … and my career is over. I’ll be like Martha (expletive) Stewart.”
The homemaking maven was convicted in 2004 of lying to the government about the sale of her shares in a friend’s company whose stock plummeted after a negative public announcement. She served five months in prison and five months of home confinement.
Prosecutors charged those arrested Friday with conspiracy and securities fraud.
It was not immediately clear who was representing the lawyers in court appearances scheduled for U.S. District Court in Manhattan later Friday.
A news conference was scheduled Friday afternoon by federal prosecutors and the Securities and Exchange Commission to explain the charges further.
A separate criminal complaint in the case said Chiesi and Moffat conspired to engage in insider trading in the securities of International Business Machines Corp.
According to a criminal complaint in the case, Chiesi and Rajaratnam were heard on a government wiretap of a Sept. 26, 2008 phone conversation discussing whether Chiesi’s friend Moffat should move from IBM to a different technology company to aid the scheme.
“Put him in some company where we can trade well,” Rajaratnam was quoted in the court papers as saying.
The complaint said Chiesi replied: “I know, I know. I’m thinking that too. Or just keep him at IBM , you know, because this guy is giving me more information. … I’d like to keep him at IBM right now because that’s a very powerful place for him. For us, too.”
According to the court papers, Rajaratnam replied: “Only if he becomes CEO.” And Chiesi was quoted as replying: “Well, not really. I mean, come on. … you know, we nailed it.”
The criminal complaints in the case also captured what authorities said were efforts by the defendants to hide their conversations from authorities.
In one conversation, Chiesi was heard telling Rajaratnam that she was “glad that we talk on a secure line, I appreciate that,” to which Rajaratnam replied: “I never call you on my cell phone,” the complaint said. It added that Chiesi said she was “nervous” about being investigated.
Associated Press Writer Tom Hays in Riverside, Calif., and AP Business Writer Candice Choi in New York contributed to this story.

“SEC unit hires ex-Goldman Sachs worker as chief operating officer
Adam Storch had worked since 2004 in a Goldman unit that reviewed contracts and transactions for signs of fraud. His new job is to make the SEC’s enforcement division more efficient.”

————————————

How many people think that the SEC will get to the bottom of this? How many people think that the new administration’s promises of Hope and Change are actually taking place? If so, please contact me ASAP. I have a bridge and some valuable swamp land to sell you….

We’re still having technical difficulties on getting my abusive naked short selling “forum” on deepcapture.com going. Here’s a link to a paper I just sent into the SEC today in re: the recent “roundtable’ on NSS and securities lending.

Ladies and gentlemen, this arrest today was a fly on a gnats behind. When they arrest Jim Chanos, David Einhorn, Steve Cohen or John Paulsen, then and only then will I know that the beginning of the end is near for the Wall Street Terrorists. Until then I remain unimpressed!!! This Raj character was not a member of the good ole boys network, he was an outsider..a bit player, a guppy!!!

Picard raised the stakes from $5 billion to $7.2 billion and holds no punches in addressing Picower’s claim that he could not have known about the fraud because he made too much money from it. Picower fails to address the substantive allegations that he knew or should have known about the scheme and Picower’s arguments are “dubious at best,” the response says.

In his motion to dismiss, Picower stated that the billions he withdrew would have “placed an extraordinary strain on the scheme” and that it would make no sense for Madoff to compensate Picower for making the scheme more difficult.

ProPublica: The trustee notes that Picower’s largest withdrawals were quarterly, allowing Madoff to plan ahead for them. The trustee also adds a new detail to the story. As early as 2003, Madoff was having trouble paying Picower the full amount the investor was demanding every quarter. “[Madoff’s] failure to pay Picower sums that purportedly were in his accounts or otherwise available to him is further evidence that Picower knew or should have known of Madoff’s fraud,” states the brief. “This evidence becomes more compelling given Picower’s apparent lack of complaint about his inability to access billions of dollars reported on his [Madoff] account statements.”

Read the whole report here.

In response to Picard’s latest filing, Picower’s attorney, William Zabel, told ProPublica, “[T]he Trustee continues to make false and outrageous claims about Mr. Picower based on a misreading of the purported “facts.” When the true facts are known, the Court will see that Mr. Picower was deceived by Bernard L. Madoff like the SEC and thousands of other investors, as many as half of whom took out more money than they put in.”

Zabel indicated his client hoped to reach a settlement. A hearing on the motion to dismiss is scheduled for October 27.

It seems that this chapter from one of your books is more accessible to those unfamiliar with Wall Street terminology than other more technicals letters from you to the SEC I have read before.

I had trouble understanding only one point in your ACME example. I did not understand how the number 42 for readily sellable securities came about… I will re-read it.

Please post notes here about what is going on in the forum so people like me who do not go the forum often will know to look over there to see the details.

Thanks Dr. Jim DeCosta for your continuing work to shed light upon the Wall Street Counterfeit Machine, and how this second tier ponzi scheme is protected by the supposed Wall Street Cops who refuse to force the Wall Street Criminals to deliver real stock shares to buyers of stock.

The Wall Street Counterfeit Stock Sellers only have to put up 2% of the value of the counterfeit shares they sell, BUT the buyers of these counterfeit shares are forced to pay 100% of the value of real shares of stock and NOT allowed to know that they only have IOUs, stock entitlements, for real shares.

Not a bad exchange for Wall Streeters – only 2% needed by Wall Streeters to sell counterfeit shares of stock with the potential to gain access to 100% of the buyers money. This is the Status Quo on Wall Street.

No wonder the big Wall Street Players at the recent Round Table love the status quo – they make “Steal” billions and trillions of dollars from us Non Wall Streeters year after year with help and assistance from the supposed Wall Street Cops.

Acme started with 40 shares in its “float” of readily sellable shares. A short seller borrows 2 shares from the margin a/c of a broker/dealer. He sells them to a new buyer of shares. The new buyer gets the “legal ownership” of those 2 shares he just purchased. The holder of the margin a/c whose shares were borrowed knows nothing of this borrowing and sale. He will continue to get a monthly brokerage statement IMPLYING that his clearing firm is “holding long” those 2 shares.

He now has a 2-share “long position”. He “legally owns” nothing. What he holds now is referred to as a “security entitlement”. The 2 shares that he used to “own” got sold and the new buyer becomes the new “legal owner”. The “supply” of that which is readily sellable within the share structure of Acme is now 40 readily sellable “shares” PLUS 2 readily sellable “security entitlements”. The “supply” variable that interacts with the “demand” variable to determine the share price is now 42 readily sellable “units” (for lack of a better term). Since the “demand” variable remains fixed the share price will drop a notch.

This new legal owner of those 2 previously borrowed “shares” has as their “legal owner” all of the right in the world to rent those 2 shares to a different short seller who then sells them to a new investor. The new readily sellable “float” in Acme’s share structure is now 44 readily sellable “units” a 10% increase over the 40 units Acme started with. The share price drops yet another notch. This is “legal” short selling I’m describing. It involves legitimate “pre-borrows”. Legitimate “shares” have “legal owners”; readily sellable “security entitlements” have “entitlement holders”. “Entitlement holders” have readily sellable “long positions”. Acme is now a much different corporation than it used to be. It’s current share price, its future share price and its prognosis for success have dropped markedly from “legal” short selling. With the way our DTCC operates legal short selling is corrupt unless rigorously monitored; abusive naked short selling is flat out criminal.

UCC Article 8 mandates that all “holders” of “security entitlements” be allowed to sell that which they purchased. Why? Because the assumption is that the SEC, FINRA and the DTCC will be closely monitoring for any abuses due to the inherent “counterfeiting/replicating” associated with even legal short selling. The authors of UCC-8 were wrong!

Sorry about the “anonymous” up there is was just me. Here’s the killer to all of this. Let’s say that Acme has 100 shares “outstanding” and 40 shares in its readily sellable “float”. The “security entitlements” being essentially “issued” every time a borrow is done on Wall Street are not technically “outstanding” in a share structure for some technical reasons. The DTCC has the audacity to misrepresent to investors that since Acme’s # of shares “outstanding” hasn’t gone up then there is no such thing as “phantom shares” (another term for “security entitlements”)and that Acme and its shareholders incur no damages from short selling or abusive naked short selling. Newsflash: The “supply” of readily sellable “units” that interacts with “demand” to determine share prices has nothing to do with the number of shares “outstanding”. The “supply” variable consists of anything that the law says must be treated as being readily sellable and this includes all “security entitlements” whether they were induced to be issued by legal borrows,illegal borrows, bogus locates, FTDs, SBP borrows, etc.

So who owns the DTCC? It’s the market makers, clearing firms, prime brokers, etc. that are the beneficiaries of these abusive short selling thefts.

What confuses me in your discussion of “shares” versus “security entitlements” regarding even legitimate short-sales is that, well, legitimate short-sales need to be settled by the actual return of borrowed shares to their original owner and the actual delivery of purchased shares to their new owner. So while ACME might have artificially grown from 40 units in the “salable float” to 42 to even 44, it must – with some timeline – revert to being the original authorized 40 units.

Otherwise, how could ACME sensibly & responsibly pay out its quarterly cash dividend?? Only a _true_ shareholder, not an entitlement holder, ought to receive the dividend (and thus the requirement to report it as taxable income). Or does ACME get bled further by paying dividends to entities who actually should not receive them?

Similarly, how could ACME know whom is eligible to attend the annual shareholders’ meeting and to vote in matters of corporate governance?

You sign a trust agreement with your brokerage that it “owns” your shares when you buy them. If it breaks the agreement, there is nothing illegal and no one goes to jail. It’s just breach of contract and something you would sue for.

If they claim that the entitlements are any more than an IOU, which some brokerages do, then there is fraud and I think they should be arrested.

The broker enters into trust agreements with the clearing broker, who goes into trust agreements with the depository who enters into trust agreements with the DTC, who enters into some unknown trust agreement with Cede & Co., the mysterious private partnership that actually OWNS the shares and who can vote those shares the way it wants and can PLEDGE those shares against loans, etc.

Since no customer of a brokerage OWNS shares, they ALWAYS receive a matching cash entitlement rather than the dividend. From Cede on up, a dividend flows up. If the share doesn’t exist, they just match the dividend amount.

Where it falls apart is if the dividend is limited in some way, such as a share of a private spin out. Then they just refuse to give you what you own and offer you your purchase price back. If the dividend is the share of another public company, they just COUNTERFEIT shares in that other company.

So, in answer to your question, every shareholder (defined as being listed on the company shareholder list) receives a dividend. Everyone with a cert. gets a dividend. One of those “people” is Cede & Co. If you are lucky, Cede & Co. and the rest of the daisy chain forwards it to you.

Is it just me alone thinking to myself that if I were doing anything illegal on Wall Street for the last few years that the Federales may have been or still could be listening. And for those that got a “heads up” in time like Art Samberg..close up my hedge fund ahead of my indictmnts. Could be. Things that make you say “HHHHMMMMNNN!!!!

Marano is planting the seed in Boyd’s brain. He is claiming there are these rumors and that HE has nothing to do with them. He is calling Boyd to “let him know” what’s happening. Boyd is nodding his head to Marano’s whip.

Boyd calls up other banks doing business with Bear to “confirm the rumors”. What he is doing in the process is “spreading the rumors”. And he’s doing it very quietly.

What remains to be seen is that when “Boyd” did the right thing by “not spreading rumors” either officially or knowingly (sic), did he short Bear Stearns in his personal investment account?

I know it’s confusing but any crime as obvious as refusing to deliver that which you sold after gaining access to the purchaser’s funds needs to be confusing to provide the cover up so don’t feel bad. I think I see 3 questions in your query. #1 The short sale trade already settled; it was settled by the delivery of the “borrowed” shares. The clearing firm of the investor with the margin a/c had an easy choice. Does he want the investor’s shares which the CF (and not his client with the margin a/c) legally “owns” gathering dust as an electronic book entry or does he want them converted into cash collateral for him (the CF) to earn interest off of. Will the CF ever say to the borrower, hay I want those shares back here’s your money back? No, if he ever needs Acme shares he can always go to the NSCC stock borrow program’s (SBP) self-replenishing lending pool of Acme shares which never runs dry. This “daisy chain” of loans is always available to be set up. That 44 number will never go back to 40 unless all Acme shareholders went to the DTCC and said deliver my shares stat. The DTCC has illegally taken on a “fractional reserve” basis for taking “custody” and “safeguarding” our securities. What kind of a “legal custodian/fiduciary” would facilitate the counterfeiting of that which it has in its “legal custody”. This demanding delivery of paper-certificated shares would be the analogue of a “run on the bank”. If the shareholders tried this the DTCC would call a “time out” and put a “chill” on any further delivery of Acme shares to the investors demanding their delivery. This is despite the fact that UCC Article 8 mandates that they accommodate any “entitlement order” demanding delivery of a financial asset filed by a “security entitlement holder”.

Question #2: If Acme pays a cash dividend then all short and naked short sellers are indeed forced to match it. Those CFs with FTDs on their books will cut a check and distribute what’s referred to as a “PIL” or “payment in lieu” of a dividend. It’s also referred to as a “substitute payment”. Here’s the catch, the IRS has already stated that if Acme has 100 shares “outstanding” and let’s say 60 “security entitlements” in its share structure they (the IRS) will only allow the distribution of 100 1099’s for “qualifying dividends” that will receive preferential tax treatment as per JAGTTRA. The purchasers of the 60 mere “security entitlements” that thought that they had bought legitimate “shares” are expecting but may or may not get preferential tax treatment for their purchases. To cover up the entire fraud CFs are now supercharging the dividend so that nobody will bellyache. The problem is that they don’t know which tax bracket the investors are in so they assume they’re in the maximum tax bracket to pull off the cover up.

Here’s where the lawsuits are going to come in. Let’s say Bigco takes over Acme on a 1-for-1 share swap basis and the shareholders approve it on a 158 to 2 vote. First of all, this is an interesting vote tally for a company with only 100 shares outstanding. What the DTCC and its participating clearing firms will do is to secretly “issue” 160 readily sellable shares/security entitlements of Bigco to the owners of Acme shares. Bigco’s board of directors thought they were paying for Acme by issuing 100 Bigco shares. They were wrong. They had to be lied to lest the existence of this entire “industry within an industry” be made known and nobody participated in our markets.

Bigco’s share price has to tank after the takeover as their “float”/”supply” of readily sellable shares and/or security entitlements went up 160 units when they were only counting on it going up 100 units. The DTCC management will proffer three things: 1) out of one side of its mouth it will say that they had no idea that their “participants/bosses” at these clearing firms were misbehaving in regards to Acme and Bigco; shame on them. 2) out of the other side of their mouth they’ll say (as Bigco’s share price falls off of a cliff) well it’s no big deal because those 60 extra Bigco shares/security entitlements we and our CF “participants” issued actually represent FUTURE buying of Bigco shares that EVENTUALLY must occur (if they don’t go bankrupt from this transaction in the meantime) so no harm no foul and that’s why we didn’t call it to the attention of Bigco’s board. 3) when Bigco’s board learns of this fraud they’ll approach the DTCC and demand that the DTCC buy-in all of those delivery failures that are poisoning their share structure that the DTCC forgot to call to our attention BEFORE WE VOTED ON THE TENDER OFFER. The DTCC’s response after attaining a monopoly on 15 of the 16 sources of empowerment to execute buy-ins will say sorry, we’re “powerless” to execute buy-ins of our bosses when they misbehave.

Bigco’s shareholders would not have approved that merger if they had access to the truth. How often does this happen? Think about it, why did Bigco find Acme attractive? It’s because it was trading at a ridiculously low share price BECAUSE OF the 60 invisible security entitlements that was poisoning its share structure and increasing its “supply” of that which must be legally treated as per UCC Article 8 as being readily sellable.

Very interesting article.. here is an exceprt and the link below. Do you really think this case was/is about “Only” 20 million ii profit? Hell Samberg made that in 1 ONE illegal trade for Pequot!!! Also an SEC attorney (Gary Aguirre) brought this Pequot story to the SEC and it was WAY bigger than this one but it never saw the light of day. Can you spell “JUICE” I guess Raj Raj did not have any juice, like John Mack and Art Samberg huh? If there were only a pattern.

“A hedge fund manager worth $1.5 billion was arrested on Friday, along with five executives who allegedly helped that hedge fund make $20 million. This raises some interesting questions.

Why would someone worth more than a billion risk it all for a little extra change? Why would executives who are probably worth millions risk their careers to help that hedge fund make a bit of extra money? Is the hedge fund in question alone in using inside information to profit?
The answer to the first question is simple to guess at but tough to prove. It is entirely possible that Galleon, the $3.7 billion hedge fund in question, did not make a mere $20 million of its roughly 20 percent annual returns from insider trading, it is possible that most of its profit came from such trading. The answer to the next: a belief that their involvement would help them catch up with hedge fund wealth.”

Some serious sweating is going on on Wall Street and Connecticut right about now!!LOL

U.S. Said to Target Wave of Insider-Trading Cases After Galleon Wire Taps Continued OCT 19

U.S. Said to Target Wave of Insider-Trading Cases After Galleon

By Joshua Gallu and David Scheer

Oct. 19 (Bloomberg) — Federal investigators are gearing up to file charges against a wider array of insider-trading networks, some linked to the criminal case against billionaire hedge-fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said.

The pending crackdown, based on at least two years of investigation, targets securities professionals including hedge- fund managers, lawyers and other Wall Street players, the people said, declining to be identified because the cases aren’t public. Some probes, like the one that focused on Rajaratnam, rely on wiretaps. Others stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments.

Galleon Holdings, the $3.7 billion hedge fund whose founder, Raj Rajaratnam, is out on $100 million bail for his role at the center of a $20 million insider trading scandal, owns big positions in dozens of public companies. And those companies’ share prices and management teams could be in trouble. Of course, Galleon’s stakes in these companies are a problem only if any of their employees have followed the same process of tipping Galleon as the public companies I posted about here allegedly did.

How so? If Galleon is liquidated, its holdings are likely to be sold, and although Galleon’s positions are a relatively small proportion of these companies’ total market capitalizations, if those companies have moles inside who fed information to Galleon, the companies will be embroiled in investigations that could at least distract top management. At worst, it could lead to high-level firings.

Based on Galleon’s latest SEC filing on its holdings, as of this August, its 10 biggest common stock positions are as follows:

The name of hedge-fund billionaire Raj Rajaratnam, charged last week in a major insider-trading case, also surfaced in a separate probe into fundraising for a Sri Lankan terrorist group, reports the Wall Street Journal.”

I find it interesting that Raj is being investigated for connections to a terrorist group, because I consider the Wall Street Criminals working the Wall Street Counterfeit Machine as Financial Terrorists.

World pressure and newspaper coverage, including on the naked short selling of gold and bonds is really important. The way I see it, the central banks are trying to bail out their friends who owe stock, bonds and gold they can’t deliver and the way they are doing it is to loot the productive economy.

“To overcome that hurdle, the SEC began using computer software about two years ago to sift hundreds of millions of electronic trading records, known as blue sheets, attached to the stock exchange reports about suspicious incidents, according to people familiar with the project. By looking for patterns in the library of data, they identified groups of traders who repeatedly made similar well-timed bets. ”

I am assuming if this secret mission by the SEC started 2 years ago then the findings on who took down BS and Leh should be readily accessible for immediate prosecution ?

Davidn says what happens when a naked shorted company pays a dividend
“Where it falls apart is if the dividend is limited in some way, such as a share of a private spin out. Then they just refuse to give you what you own and offer you your purchase price back.”

I don’t get it. If I don’t get what I am entitled to, I will sue the broker. How can they convince a court that they don’t have to give me those shares?

If you sue, you get your shares in the private spin out. It’s the same as if you are one of the 2% that vote. Then they find your shares.

The 98% that don’t sue get their money back from their brokerage. “Sorry, it turned out you didn’t buy a real share. That seller screwed you. We’ll give you your money back at your purchase price, even though the stock has gone down 99.9999999%”

Too me, a huge scam is when companies are delisted, the brokerages typically remove the shares from your trading account as having no value. Who gives them that right? What if I own 51%? Can my broker steal those shares from me? What if I wanted to use my controlling stake to merge with a company that is good?

Too me, even a scam company has a lot of value if it has a lot of IOU’s. What if the scam company shell bought something with real value and forced the IOU’s to be honored?

The reason this persists is that it is cross jurisdictional. If you sue in California, you won’t get records from Malaysia or Berlin because the court doesn’t have jurisdiction. Discovery will only ever get you a partial picture to what is actually going on.

In my mind, there is too much focus on the action, the verb, the naked shorting.

What about the passive custodial activity. If the states / Feds. started arresting custodians that committed mail fraud by sending statements that implied shares were in safekeeping when they weren’t, then this activity would cease.

This isn’t like fractional reserve banking. Depositories, clearing brokerages and introducing brokerages should be required to own the shares they tell their customers they have in trust. If they don’t own them, it is fraud.

“The pending crackdown, more than two years in the making and among the biggest undercover operations into insider trading, may yield charges against hedge-fund managers and their associates as early as this week, the people said, declining to be identified because the cases aren’t public. Authorities had planned to arrest Rajaratnam this week as part of a broader sweep, expediting it after learning he had bought a plane ticket to travel to London on Oct. 16, one person said.”

Now if and only if one or more of these Hedge Fund managers are the same ones that shorted DNDN that Mark announced in the DNDN saga this will be for real. I want Chanos, Einhorn, Paulsen,Cohen just to name a few on the firing squad. But its a start.

The must see story that veteran producer / director Michael Kirk (Inside the Meltdown, Breaking the Bank) reports in this Tuesday night’s FRONTLINE is both riveting, illuminating and the perfect follow through for Michael Moore’s Capitalism / A Love Story ~ for Michael never really gets his questions answered about Derivatives.

Sifting the ashes of the financial meltdown, Kirk finds a lawyer named Brooksley Born, who, from her perch at the little-known Commodities Futures Trading Commission, tried to convince the country’s key economic power players to do something which may have helped avert the financial crisis: regulate the increasingly high-risk financial instruments called “derivatives.”

“They were totally opposed to it,” Born says of the fierce resistance to regulation she met from Alan Greenspan, Robert Rubin, and the other members of President Clinton’s “working group” ~ a highly influential and secretive body that determined the country’s economic policy. In her first television interview, Born tells FRONTLINE that she was “puzzled” by the opposition she faced in Washington. “What was it that was in this market that had to be hidden?”

” Born’s battle behind closed doors was epic, Kirk finds. The members of the President’s Working Group vehemently opposed regulation ~ especially when proposed by a Washington outsider like Born.

“I walk into Brooksley’s office one day; the blood has drained from her face,” says Michael Greenberger, a former top official at the CFTC who worked closely with Born. “She’s hanging up the telephone; she says to me: ‘That was [former Assistant Treasury Secretary] Larry Summers. He says, “You’re going to cause the worst financial crisis since the end of World War II.”… [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'”

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. “Born faced a formidable struggle pushing for regulation at a time when the stock market was booming,” Kirk says. “Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves.” Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one. ”

Sifting the ashes of the financial meltdown, Kirk finds a lawyer named Brooksley Born, who, from her perch at the little-known Commodities Futures Trading Commission, tried to convince the country’s key economic power players to do something which may have helped avert the financial crisis: regulate the increasingly high-risk financial instruments called “derivatives.”

There are 2 politicians that are not yet owned by special interests and Corporations they are Grayson and Kaufman. Finally someone taking the bull by the horns and by freshman senators to boot!!! GET RID OF THE SEC!!!

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